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Debates Forum

  1. 16 Sep '10 11:48
    Gold recently hit new record highs after many investment analysts have predicted lower prices for years now.

    Why were they so wrong and how high can gold go from here?
  2. 16 Sep '10 11:48
    Predicting the peak of a bubble is nigh impossible.
  3. 16 Sep '10 12:37
    Originally posted by KazetNagorra
    Predicting the peak of a bubble is nigh impossible.
    What makes you so sure it is a bubble?
  4. 16 Sep '10 13:21
    whenever the price of an investment starts to continually rise, it will inevitably attract people who aren't focused on underlying value of that investment - all they see is that "its value has been rising steadily for a pretty long time -- COOL!!! -- so this should be a way to make a really EASY profit"

    this psychology, of course, causes the price to rise even more - which attracts even more of these "easy profit" investors -- until something makes all these "Wile E. Coyotes" finally look down and realize there's no ground beneath them -- and then comes the crash.

    in all likelihood, anything whose value has been steadily rising (especially if its rapidly rising) is at least in part a bubble.
  5. 16 Sep '10 13:32
    Originally posted by Metal Brain
    What makes you so sure it is a bubble?
    I don't see the fundamental reason for an inflation-adjusted price increase of 200% over the last decade. Did we invent some new application for gold in the last decade that would make it more useful?
  6. Standard member Palynka
    Upward Spiral
    16 Sep '10 13:34
    Originally posted by Metal Brain
    What makes you so sure it is a bubble?
    What fundamentals explain a 5 fold increase since April 2001?
  7. 16 Sep '10 13:36
    Originally posted by KazetNagorra
    I don't see the fundamental reason for an inflation-adjusted price increase of 200% over the last decade. Did we invent some new application for gold in the last decade that would make it more useful?
    http://inflationdata.com/inflation/Inflation_Rate/Gold_Inflation.asp
  8. Standard member Palynka
    Upward Spiral
    16 Sep '10 13:53 / 2 edits
    Originally posted by Metal Brain
    http://inflationdata.com/inflation/Inflation_Rate/Gold_Inflation.asp
    So the biggest drop in gold was the 1979 oil crisis and yet he says it's a good "hedge"? Haha!

    His arguments actually defend that gold rises in the run-up to a crisis (see his comments about trust in IOUs) because people don't know where to put their money. This means you get high volatility in gold during crisis (fast rises followed by fast drops). That's exactly what you don't want in a hedge.

    Investors flock to gold because they think other investors will flock to gold and so prices rise when they do. That's as close as a definition of a bubble as it gets. Sure you can make money by riding the wave and exiting before the crash, but that's what happens in any bubble. Like the musical chairs, the last one to stop dancing is going out.
  9. 16 Sep '10 14:54
    Originally posted by Palynka
    So the biggest drop in gold was the 1979 oil crisis and yet he says it's a good "hedge"? Haha!

    His arguments actually defend that gold rises in the run-up to a crisis (see his comments about trust in IOUs) because people don't know where to put their money. This means you get high volatility in gold during crisis (fast rises followed by fast drops). That' ...[text shortened]... ppens in any bubble. Like the musical chairs, the last one to stop dancing is going out.
    Even so, that just establishes that it is possible for gold to go over $2000.00 an ounce, right?
  10. 16 Sep '10 14:56
    Originally posted by Metal Brain
    Even so, that just establishes that it is possible for gold to go over $2000.00 an ounce, right?
    Of course it's possible, it's also possible for horse manure to go over $2000 an ounce.
  11. Standard member Palynka
    Upward Spiral
    16 Sep '10 15:10
    Originally posted by KazetNagorra
    Of course it's possible, it's also possible for horse manure to go over $2000 an ounce.
    It's funny how so many people seem to forget how little it means for something to be possible.
  12. 16 Sep '10 15:11
    Originally posted by Metal Brain
    Even so, that just establishes that it is possible for gold to go over $2000.00 an ounce, right?
    Depends on how long the music keeps playing. Sometimes the music can play for a very long time.

    But the longer the music plays, the greater the number of participants, and the fewer the number of chairs -- so when it finally does stop...look out!!
  13. Standard member Palynka
    Upward Spiral
    16 Sep '10 15:17
    Originally posted by Melanerpes
    Depends on how long the music keeps playing. Sometimes the music can play for a very long time.

    But the longer the music plays, the greater the number of participants, and the fewer the number of chairs -- so when it finally does stop...look out!!
    I hope the royalties are in the mail.
  14. 16 Sep '10 15:17
    Originally posted by Melanerpes
    Depends on how long the music keeps playing. Sometimes the music can play for a very long time.

    But the longer the music plays, the greater the number of participants, and the fewer the number of chairs -- so when it finally does stop...look out!!
    A prime example is the Nikkei. A bubble of epic proportions, that one.
  15. 16 Sep '10 15:19
    Originally posted by KazetNagorra
    I don't see the fundamental reason for an inflation-adjusted price increase of 200% over the last decade. Did we invent some new application for gold in the last decade that would make it more useful?
    the main "rational" reason why people buy gold despite really high prices is that they fear that large amounts of government spending or debt levels will soon lead to runaway inflation that will destroy the value of the existing major currency -- making even the safest bonds essentially worthless.

    So if you really believe we're soon to face what Germany faced in the 1920's, then buying gold for $2000 or more per ounce would be a very sound investment. Otherwise, you're probably going to be one of the many losers at this game of musical chairs.